Why is Credit Riskier in the South?

Luca Casolaro (), Marco Gallo () and Iconio Garrì ()
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Luca Casolaro: Bank of Italy
Marco Gallo: Bank of Italy
Iconio Garrì: Bank of Italy

Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, 2024, vol. 10, issue 3, No 5, 1087-1117

Abstract: Abstract This paper investigates the determinants of the territorial divides in the default rate of firm loans in Italy. During the period 2006–2019, the South of Italy exhibited consistently worse credit quality than the Centre-North, with the gap widening during the recession following the 2011 sovereign debt crisis. Credit demand and bank supply factors explain only less than half of the observed difference. Even when accounting for economic trends, a substantial unexplained gap remains. This residual gap is concentrated among the small and more vulnerable firms and appears to be essentially attributable to the external diseconomies that characterize southern Italy.

Keywords: Credit quality; Geographical disparities (search for similar items in EconPapers)
JEL-codes: G21 R19 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s40797-024-00293-3

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